With Christmas holidays approaching, most of you might be concerned about how much you’re going to pay for it all. The impact of COVID-19 can be well felt on the holiday season. Even though you’re planning to have a socially distanced, scaled-back party this year, availability of finances is a major factor for all your plans. You could be tempted by the attractive Black Friday and Cyber Monday sales lining up.” Don’t fall for it if you are not doing financially well. Moreover, even if you have enough savings, its always better to stack some extra money in your bank account rather than spending it on things that you may not even use it.
But celebrations are the little joys of life and that’s the only affirmative thing to do during these trying times. A Christmas party or any special surprises under the tree, a Christmas loan could help you blow out a lot of financial pressure. But if you do not have a repayment plan, then the loan may stress you out after the holidays are over. Consider taking out a personal loan for Christmas only if you can afford to repay the loan on time and in full.
Does a Christmas loan come under the personal loan?
When you explore your Christmas choices, you will come across various advertisements selling “Christmas loans.” What they give is a personal loan for those who need (or want) extra money for celebrating Christmas. You are not bound to spend the money on your Christmas expenses. If you want that money to be used for making necessary home improvements, you can go ahead and plan for it. If you want to pay off your debts before the year ends and start leading a financially stable life, you can use this loan to consolidate your existing debts.
Like all types of personal loans, a Christmas loan may be a secured or unsecured loan. Your terms and conditions of eligibility are determined by a wide range of factors that may differ from lender to lender. Go through the eligibility criteria of the lender before applying for a loan.
Things to consider before borrowing a Christmas loans
1. Qualifying for the loan
Some lenders let you know their decision for a loan by pulling a soft credit check that won’t spoil your credit score. Narrow down your search list for favourable lenders by comparing multiple loans offers with a single application form.
2. Monthly instalments
Christmas loans are instalment loans. That ensures they will have recurring instalments due over a fixed period as chosen by you while filling up the application form. It will make it easier for you to prepare the budget and stay on the track for the repayment period.
3. Interest rate
Personal loans appear to have lower interest rates as compared to credit card interest rates. However, that is also based on the lending conditions and the shape of your credit score. So, taking out a personal loan will help you save money on interest.
4. Quick financing if approved
Almost all the lenders are now operating online. The application and funding process is usually simple and quite straightforward. If you are accepted, you may also collect your loan on the same day, allowing you more time to plan for the holidays. However, the time that it will take for the money to reach your bank account also depends on who you bank with.
Some lenders charge origination or a prepayment penalty. Check with the lender before you enter into the deal legally. Ask them about the overall cost of the loan and ensure that you go through the fine print.
6. Effect on credit
If you make a late payment or default on your loan, your credit ratings can be adversely impacted. Pay careful attention to the total cost of the loan, because you know that you can handle the instalments. If at all you feel like you cannot make the repayments, reach out to the lender and talk to them about your situation. They are likely to help you with redevising a new repayment plan.
Alternatives to Christmas loans
Using your savings is usually better for expenditures such as holiday presents, however, there are other choices that you may take into account. One of the cheapest ways to borrow money is to charge your expenses on a credit card. It will be much better if you find a 0% APR credit card, particularly if you pay the balance back during the promotional period of the card as you do not have to pay back the amount that you have used with any interest rate.
Search for a credit card that offers a promotional duration of more than a year. As long as you pay the full balance during this time, you can borrow the interest-free money. Borrowers with decent or excellent credit are more likely to be approved for a 0% APR credit card. As soon as the holiday season settles down this year, consider saving up for the next year, right from the beginning.
Christmas loans and other borrowing solutions are one way to go but, again, budgeting and putting aside funds is the safest choice. By having a budget and sticking to it you can relieve your financial burden. The budget for holidays should include your usual expenses as well as your additional expenses. This will help you decide how much you need to pay without falling into debt. Often, make sure you create a list of things that you need to buy, so you won’t be tempted to purchase urges. While a Christmas loan may make it easier for you to indulge your family, it is financially better to the budget and, if you can, to set aside money for holiday expenses. Start by squeezing some holiday cash in a dedicated savings account today. You will also love the holidays a lot more recognising that you will ring a new year without any extra debt.